EXCLUSIVE: Is Airbnb driving out long-term tenants?

The Airbnb circus flew into South Africa a few days ago, dazzled city fathers and thousands of homeowners in Johannesburg and Cape Town with awe-inspiring figures reflecting serious growth in tourist home stays and in home hosting profits.

The company’s Chris Lehane, Airbnb’s global head of public policy and public affairs, left South Africa clutching a cooperative agreement with Cape Town, Africa’s tourist jewel.

Is Airbnb giving back?

The signing of that agreement seemingly came on the back of an undertaking by Airbnb to broaden, along with local partners, a successful pilot programme to support training in hospitality and technology for residents from townships across the Western Cape. In fact, the alluring programme will be expanded to include women and young people from underserved communities in 15 more township communities across South Africa. Such an initiative has to be applauded.

No one can fault the digital home-sharing company for the whizz-bang figures it shares with us. Tourists love spending time with private hosts in their homes as opposed to laying down their weary limbs in more traditional forms of accommodation – hotel occupancy figures notwithstanding.

Just take a look at the Airbnb’s figures for Johannesburg in the 12 months to September this year: 51,500 guests staying in private homes and injecting R197m into the economy with most hosts earning a claimed average of R14,900 from holiday lets in the last year.

Cape Town has an imposing number of home host listings at 17,600, adding R762m to the economy in the last 12 months, according to Airbnb statistics. Little wonder that property owners are queuing up to open their homes to holidaymakers eager to spend their money exploring our edgy continent.

Does Airbnb push out long-term tenants?

A pertinent question though: what independent authority verifies these figures? Airbnb is decidedly cagey about opening up its databases for scrutiny as New York City authorities have found when trying to access certain Airbnb data through court action. Airbnb refused to release the exact addresses of hosts who break the law by renting their entire apartment for less than 30 days without being present.

Lehane was in fine form in Cape Town recently, sharing the good news about the influx of tourism dollars and the expansion across Africa of the “host-empowerment programme” trialed in the Cape.

A short-lived hiccup to the hyperbole was smoothly dealt with. Replying to a question about escalating rentals on the Atlantic Seaboard and City Bowl in Cape Town as a result of properties being kept vacant for holiday rentals, he said his company welcomed regulation. But he neatly qualified that statement by adding that rental prices in any city are impacted by a range of factors.

How does the sharing economy benefit all residents?

Cape Town mayor Patricia de Lille, who in September launched a survey of all relevant stakeholders to get input on the thorny issue of short-term/holiday letting, conceded a few days ago that the city has been derelict in keeping pace with the need to regulate Airbnb (and no doubt other home-sharing platforms). The web-based survey closed last Friday (October 28).

The objective of the survey was to “better understand the shared economy and its impact on all residents” and was launched amid a furore over whether or not the city is prepared to prosecute homeowners who are breaking the Municipal Planning By-law (MPBL) together with its policies and frameworks, by holiday letting without receiving permission from the city. The MPBL is supposed to provide control over holiday accommodation, and in particular holiday letting in residential apartment blocks and other residential developments.

But there has been open defiance of the bylaw which, according to Zara Nicholson, Cape Town’s Manager: Mayoral Media, “is still applicable as it currently stands” but “was drafted and approved prior to the expansion of the shared economy and technological advances in the tourism and short-term letting sector which are ever-changing”.

And that’s the rub

Scores of cities around the world are looking at a range of varying control measures aimed at better managing the virtually uncontrolled growth of holiday letting with Airbnb in the vanguard of such growth. Cities around the world regulate land use matters through various bylaws and other regulations.

Airbnb has been involved in direct confrontations with various cities, including New York and San Francisco, and took to the courts to fight the imposition of such controls. In 2016 the company made an abrupt about-turn, abandoned legal action and issuing a statement saying it supported a one host one home policy as opposed to one owner multiple homes model whereby homes were kept vacant specifically for holiday letting.

HomeTimes has tried, unsuccessfully for some weeks, to get from Airbnb a copy of the one host one home policy. Extensive desk research has brought to light published media reports showing that the company has adopted what it calls a community compact policy. In terms of that positioning, the company’s approach is to negotiate agreements on a city by city/state by state basis. But the company remains cagey about releasing in-depth figures.

Company CEO and co-founder, Brian Chesky, hinted in announcing the community compact document in late 2015 that in cities where there was a housing shortage, Airbnb would somehow ban people from renting out their investment properties. Everyone would be limited to using the home-rental site only for his or her own permanent residences. When the New York-based Business Insider publication asked Airbnb in which cities would this policy apply Airbnb declined to comment but said the company was looking at the community compact policy on a city-by-city basis.

How the long-term rental market suffers

Fast forward to January this year: Laura Spanjian, Airbnb Public Policy Manager, said in a statement headlined Working together to protect long-term housing in Portland, that the company has a One Host, One Home policy aimed at addressing the “housing affordability crisis and unwelcomes commercial operators who may be converting housing to illegal hotels on our platform and others”.

Introducing the policy to Portland, she said Airbnb had already launched the One Host, One Home product in New York and San Francisco limiting “hosts to advertising listings at just one singular address on our platform”.

You may well ask why Airbnb’s approach (and no doubt those of other home sharing platforms) has created problems around the world.

The most important issue is the shortage of longer-term rental stock in hundreds of cities around the world as a result of properties being kept solely for the purposes of holiday letting. Such owners have exacerbated the long-term rental housing shortage to the point where city residents either have to pay exorbitant rentals or move way out of the city to locations unpopular with tourists.

Even a quick internet scan of holiday letting in virtually any growing city or town will provide articles published by mainline print and online media covering the issue.

It’s no different in SA’s tourist cities

In Cape Town, a city growing steadily as a result of the influx of families migrating south from the interior and from sales of property to foreign investors, the problem relates to single owner/multiple apartment holiday letting in formerly residential apartment blocks, and in apartment blocks owned by absentee owners. In addition, freestanding homes have also been taken off the long-term rental market.

How international cities have dealt with the challenge

Berlin is probably the most extreme case based on the following: in mid-2016 the city’s administrative court upheld a de facto ban on short-term rentals in terms of which people who let more than 50% of their apartment on a short-term basis without a permit from the city risked a fine of €100,000 (R1,6m). The city established a website on which complainants could provide anonymous tipoffs about Airbnb usage. Officials for popular districts announced they would reject 95% of permit requests.

That ban was relaxed somewhat in September this year after the administrative court handed down a ruling giving an applicant homeowner the right to let his home for 182 days a year.

This and other court cases around the world indicate that city authorities need to take great care in drawing up legally, well-structured regulations to better manage holiday letting.

According to Nolo (www.nolo.com), a California-based, long-standing legal advisory service, legal restrictions on short-term rentals are not uniform worldwide and can be confusing. Confusion is exacerbated since short-term rental websites currently provide little help to prospective hosts to understand or comply with such laws.

Many cities have already implemented regulations that require homeowners to register if they want to holiday let. In addition, limitations are being imposed on the number of days per year a homeowner can let out rooms in the residence in which he or she lives permanently. Ninety days seems to be a common limitation period.

Among many other cities, London, Paris, Amsterdam, New York, Edinburgh, San Francisco, Denver, Seattle and Portland are supporting the shared economy by addressing the duration of short-term letting periods. These cities require owners to live in their premises for a specified number of days each year. Owners who holiday let have to register and pay fees. High fines are being imposed on transgressors.

In New York City, residential property located in a multiple residential dwelling unit, such as an apartment building, must be used for “permanent resident purposes”. This means that the property must be occupied by the same person or family for 30 or more consecutive days. Airbnb, which was recently valued at $31bn, refuses to release the exact addresses of hosts who break the law by renting their entire apartment for less than 30 days without being present.

Nolo reports that New Orleans has similar restrictions on the period of short-term rental use. Its local ordinance prohibits property owners from renting their homes or apartments to anyone for less than 60 days in the French Quarter or less than 30 days elsewhere in the city.

Other cities utilise their zoning laws and other mechanisms to limit short-term rentals. In San Luis Obispo County, California, a short-term rental home may not be located within 60m (200 feet) of a similar rental on the same block.

In Edinburgh, consideration is being given to introducing controls to allow homeowners to short-term let a property for no more than 90 days a year on the grounds of community issues of over-concentration, public safety, waste collection, noise and community cohesion.

Other issues that are exercising the minds of city officials around the world in relation to accommodating challenges of participating in the shared economy are:

Inadequate fire and safety infrastructure in residential sectional title and other medium-density housing developments. Registered hotels, for example, are subject to strict regulations and compliance is regularly checked by fire and safety officers. Hotels require clearly posted evacuation plans, extensive sprinkler systems and multiple exits, none of which are needed in apartment buildings.

Higher operational and service costs in apartment blocks that were designed for permanent residents and are now being partially used as holiday accommodation for scores of holiday makers.

Eroded security and perceptions of safety as a result of large numbers of strangers entering and leaving residential apartment blocks in which permanent owners pay security companies large monthly fees to kept out strangers. Property management companies report an occasional attack in Cape Town residential apartment blocks in which holiday letting is taking place.

Absentee owners holiday letting apartments do not take on the risk or responsibility of strangers sharing their apartments with them as envisaged in the one host one home Permanent residents, however, take on that responsibility.

Increased public liability insurance cover for common areas that have become high foot traffic areas used by foreign visitors. If foreign visitors injure themselves in common areas, their claims against insurance will be in high-worth foreign currencies. If insurance is insufficient to cover the value of a successful claim, all owners will be liable to make up the shortfall and not only those owners who are holiday letting. (See Addsure letter to clients).

Disruption of amenities in a residential apartment block, a right entrenched in sectional titles legislation in South Africa.